The Custodial Inventory Program is applicable only to $10 and $20 notes and provides depository institutions an incentive to hold such notes in their vaults to address customer demand and increase currency recirculation. A custodial inventory (CI) enables an institution to transfer currency to the Federal Reserve Bank's books while physically holding the currency within an institution's secured facility. Once an institution has established a custodial inventory facility, the local Federal Reserve Bank will monitor the daily deposits to and withdrawals from that inventory facility and will periodically perform site reviews to ensure compliance with the program requirement. The institution must agree to allow full access by Federal Reserve Banks, the Board of Governors, the Government Accountability Office and their agents for unannounced audits of any aspect of the Custodial Inventory operation. An established Custodial Inventory site must report its vault holdings and payments to its customers on a daily basis via an Internet-based accounting and inventory tracking system. Payments to customers are defined as payments by the Custodial Inventory site to the institution's cash customers, including commercial customers (change orders), correspondent banks and/or its branches, the institution's own branch network and/or the ATM network, but excluding deposits to the Federal Reserve.
On every business day, the amount of currency transferred into custodial inventory by the institution represents a cost savings to the institution because that amount of currency otherwise would have been required to be held by the institution or transported to the Federal Reserve Bank's facilities. Such shipments of currency to the Federal Reserve Bank's facilities incur transportation costs to the institution. Therefore, it is important to an institution to be able to utilize an institution's custodial inventory facility.